Wednesday, February 21, 2018

One of the ways I spend my time (mostly) constructively in the winter slow months I go through with my current main business, pest control, is by consuming educational and inspirational media.
This winter I discovered how I could stream YouTube content to my 50" plasma TV. This works great for me because for whatever reason I can pay attention to YouTube videos from start to finish when I'm relaxing on my couch, but when I'm trying to do the same at my computer I get distracted by everything.

One of my vlogger discoveries this winter is Graham Stephan, a realtor in the Los Angeles area who also dabbles in several things I'm involved in, such as stock market investing.

I wanted to highlight this video of his in particular though because it describes how I see money and why I focus so much on the future earnings possibilities of it. I don't care so much about what the money I earn can buy me immediately, I care very much about what earnings on that money can provide me for the rest of my life.

A great recent example: last week I was informed that I won bids on a couple of large contracts that will net me over four times my monthly budget requirements in a relatively short span of time. I could easily cover my household expenses for a while with the profits and buy a few toys, too.

However, those profits dropped into my Robinhood stock portfolio, which as I type this is yielding 10.75%, would throw off enough income per month to cover my water and garbage bills, the monthly insurance premium on my car, and about 10% of my average weekly grocery bill in perpetuity. I work really hard for a short amount of time, and then those needs are covered for the rest of my life.

(Or maybe I could drop the cash into my Hashflare account, which at current Bitcoin prices is tripling my investment.)

Sounds boring? Wouldn't an even bigger TV be more fun? Maybe, but look at it the way I do: I think working to pay water, garbage, insurance, and grocery bills is way more boring, especially when you have to do it over and over again. I find that covering my needs one-by-one with passive income, such that I don't have to trade my time for money to pay those bills, even though it means putting off a little fun now, ends up being a lot more fun over a long period of time.

Once the basics are covered with passive income, maybe I will just work a bit of pest control, blog, collect some rent, etc., then take the money I've earned and hop on a plane to Ibiza to stay up for 72 hours straight waving glo-sticks around. It wouldn't matter then because I'd come home to all of my bills being covered by my past work efforts.

Work as an option rather than a requirement. Using your time for what you want to do, rather than trading it for money. Doesn't that sound better over the long term than a couple of new toys now that will rust, rot, and depreciate?

Tuesday, February 20, 2018

A lot of people who are in debt tend to arrive at the conclusion that they should eschew all forms of credit and pay cash for nearly everything. This can be because credit of some kind got them into trouble (most cases), or it can be because of advice received repeatedly while growing up.

I pay with physical cash for almost nothing, and the above conclusion about credit is wrong.

Now, to start, I'm not saying that debt is necessarily good. You've probably heard before that there is good debt and bad debt. An example of a good debt is a loan that is taken out to acquire something that cash flows more than the debt costs, the typical example being a rental property. A bad debt is a loan taken out to buy something that "rusts, rots, or depreciates," a good example being the latest video game.

(I was going to go with "a pair of the latest-fashion shoes", but since a large number of you out there now are likely to be gamers...).

So:

Good debt = makes you money
Bad debt = costs you money

But it's not debt that I want to talk about today, except to say that what I am detailing here does require that you stay out of it for this to really be effective. My topic this morning is strategic use of credit to earn passive income through your normal, day-to-day routine spending. This is something that I've been doing for years. How? With a budget and "cash back" credit cards.

Part 1: Cards

Rewards cards typically come in three flavors: cards that offer cash back, cards that offer "points" you can exchange for goods and services, and cards that offer airline miles.

What I do requires that a card offer cash back, either as a check in the mail or a deposit to my checking account, or as a statement credit (some cards offer a combination of the above three options, but unless I can get these two specific cash back options, it's a deal breaker).

As an example, I was approved for this card just yesterday:

American Express Blue Cash Everyday Card - Click here to apply!

This is the American Express Blue Cash Everyday card, which offers 3% cash back on up to $6000 spent in grocery stores per year (1% thereafter), 2% spent at U.S. gas stations and some department stores, 1% on all other purchases, and this card has no annual fee. Additionally, new applicants who are accepted can earn $200 cash back after spending $1,000 on the card in the first three months.

This card distributes cash back in the form of statement credits only. This is an important thing to keep in mind for later.

The reason I went for this card is that of the cash back card options I have at my disposal now, it offers the best cash back amounts of them all. I spend about $6300 per year on groceries, which means I can earn $183 on that expenditure (3% on the first $6k, 1% on the remaining $300). Between myself and my business, I spend around $3500 per year on fuel for my personal and work vehicles, which would earn me another $70 per year with the 2% cash back on that category.

Total that up, and I potentially could receive $253 in cash back in a year, which on my average annual expenditures in these two categories, $9800, is a "yield" of 2.58%. If I factor in the bonus I stand to receive in the first year, it brings the total to $453 in cash back and a "yield" of 4.62%. Not bad for cash that I wasn't going to invest because I was going to spend it anyway.

So this card is specifically for my grocery and fuel purchases, because its "general spending" cash back amount is just 1%. That's why for any other type of purchase, I use another cash back card I own that offers 1.5% on general purchases (which I can switch to after I exceed $6k in grocery purchases in a year on the Amex card to boost my cash back). That particular card is a business card, which you would not be able to apply for unless you have a registered business, so I direct your attention to another strategic cash back, non-business card I also have instead:

Chase Freedom Card - Click here to apply!

This is the Chase Freedom Card, a card I've personally owned for a number of years.This one offers up to 5% cash back on the first $1500 in purchases in categories that rotate each quarter (right now it's offering 5% back on purchases at gas stations and internet, cable, and phone services; the 5% category will rotate to something else on April 1st, then again in July, and again in October). Everything else purchased with this card earns 1%. Like the Amex card I selected above, this card also has no annual fee, and it also offers a bonus for approved applicants, $150 when you spend $500 in the first three months after opening an account.

This card offers the option to take your cash back as a mailed check, by direct deposit to your checking account, or as a statement credit.

For me, this card also offers an opportunity to boost my cash back by selectively using it at key times, all having to do with the rotating 5% cash back categories.

Right now, fuel purchases are the relevant example. As I stated above, on average I spend about $3500 per year on fuel. Because on this card the 5% cash back on this category is for three months only, one quarter of my annual fuel expenditure, $875, would get me $43.75 of cash back, $26.25 more than I would get with the 2% rate on my Amex card (purely in terms of the numbers; one of the tricks Chase is using here is to offer this category in the dead of winter when people are driving less, so the totals will be different; regardless, 5% is more than 2% no matter how much fuel you actually purchase).

Later in the year, this card typically offers 5% back for a quarter on up to $1500 spent at grocery stores, offering me another opportunity to temporarily rotate away from my Amex card for more cash back.

Because the categories rotate, you do have to keep an eye on them to know what they are and when they begin and end. If you just remember to log in to your account and activate your bonus category at the start of each calendar quarter it's easy enough to stay on top of. Additionally, Chase offers reminders that can be plugged in to popular calendar apps to help you keep track.

Part 2: Budget

Recall that I said before that this is about using credit, NOT debt.

Also recall that I said I almost do not pay with physical cash for purchases. I DID NOT say that I buy things with debt.

I buy things with cash that I have, but I "pass" that cash through cards such as the two I described above.

This is where budgeting comes into the picture. Basically, cash back rewards are meaningless if you spend more on a credit card than you have in cash and end up taking on debt. Why? Because credit cards charge interest on carried balances. If you allow this to happen often enough and long enough, any cash back you might have received will be negated by the interest you are charged.

So I still save up cash to purchase things, but I do not hand the cash over at the register. I swipe my card (or dip the chip, as it goes now) and then settle up with the card issuer later, who then gives me some of that money back (and this approach can be paired up with store or manufacturer rebate offers, potentially bringing more of your cash back to you...)

Remember: cash back rewards are on purchases ONLY; you do not receive cash back on interest charges, late fees, balance transfers, or balance transfer fees.

Therefore, you must avoid excess spending with your credit cards at all costs. Whatever you charge to them must be backed by cash in your bank account so that you can pay the statement balance in full every month. If you do this, then your ordinary spending truly does net you a return. If you fail to do this, your return will be reduced, or even flip to a negative.

So you must have a budget of some form or another. How you do it is up to you (and this is how I do mine; if that works for you, great, but if not, use a method that works for you), but regardless of the particulars of it your expenditures cannot exceed the actual amount of cash you have available.

Part 3: Utilizing Your Cash Back Rewards

Recall that I said before that cash back comes in two different forms: checks in the mail or direct deposits to your checking account, or statement credits.

Between the two, I prefer statement credits. I know that receiving "free money" checks in the mail can be fun (same with direct deposits), but the reason I opt for the statement credit is that it saves some steps. Rather than spending time and money to drive to the bank or use a smart phone app to deposit my check, instead I "receive" my cash back by not having to send as much money to the card company as I've spent on the card.

Say for example that your monthly total on your card is $100, you have the $100 in your checking account (because you followed your budget), and your cash back is $5. What I do is apply the cash back to the balance as a statement credit, which reduces the amount I owe to $95, then I send the card company $95 from my checking account. The $5 that stays behind in my checking account is my cash back reward, essentially, which didn't require me to spend time depositing a check, and which I can then put to work for me in some other way that will earn me more money.

Part 4: What To Do With The Money (broke millennials, pay attention to this one)
Basically, whatever you want! If you've followed your budget and paid your cards on time, every time, then this really is extra money.

Personally, I like to put it to work in my investments. I keep a portfolio of fifty income stocks in an account I have at Robinhood, which as of this moment offers a potential 10.68% yield. So in the limited examples I gave above, if I maximize my cash back by strategically using those two cards that I own (and calculating my cash back on only those kinds of purchases, plus my Amex sign up bonus), I will receive around $515 cash back this year, which could be plugged in to my portfolio and become $55 of additional passive income per year from dividends.

Or you could go ahead and buy something that rust, rots, or depreciates, like that video game I mentioned way back near the beginning of this post.

But there's another use for these funds that could have a big impact on your life if you're like many people out there right now: by using them for reducing and eliminating debt.

It's in the news often these days that there are tens of millions of young people out there who are struggling under heavy debt burdens, particularly student loan debt. Many of you are unable to find work in the fields that your degrees pertain to, so they have essentially become the "bad debt" that I described previously, debts that cost you rather than boost your cash flow.

If this is you (or someone battling any kind of debt, it all counts here!), then chances are you're already having to budget things down to the penny, and that's good because that is key to making something like this work. And because it works by using a cash back card to purchase things you absolutely must purchase anyway, it does not require any additional funds at all. Your cash back can thus be used to pay down your debts faster.

Now, I know that some are going to balk at this and say, "but it's only $1 to $3 on every $100 spent, blah blah blah," or something to that effect. Correct, we're not talking huge sums of money here. But we are talking about more money than no money, zero, which is what you get back when you spend cash on the things you've already saved and budgeted for; something is better than nothing.

(I put that in bold because this particular objection really annoys me. It's not at all a good counter argument to this idea, it's just laziness talking.)

Every extra penny you can bring to the fight is good. Every penny you can earn with no extra effort or expenditure of your time is better. The sooner you remove a debt albatross from around your neck, the sooner you can get on to other things in your life. Passive income is the greatest ways to do this, because in a sense it allows you to be in many places at once and to add time to your day by increasing your income while not increasing the amount of time you trade for money.

This is part of how I got rid of my student loans. I sent my final payment to "Aunt Sallie" last April.

The cards I mentioned above could be out of your reach at this point; you do need an adequate credit score to qualify for any card, after all. If these two in particular don't work out, try others, just be sure to keep an eye on the details of the rewards programs they offer. If no one will open the door, start by getting a secured credit card and use it to build up your credit score until you reach the point where unsecured cards with rewards become available to you.

Additionally, go for cards that do not have annual fees. Some cards with annual fees offer higher cash back amounts, but whether or not they are appropriate for you depends on how much you spend in a year and what the fee amount is. It makes sense to get one of these cards if the expected cash back minus the annual fee is greater than the cash back you would receive on a card with no annual fee. However, because having open lines of untapped credit can boost your credit score, personally I find it better to select cards that do not have an annual fee so that I can simply leave them dormant to keep my total available credit and age of accounts up there without them incurring any costs (not to mention that I have no idea if I'll still spend at similar rates in the relevant categories in the future - things change!).

So, to wrap up, leveraging cash back cards to pass your budgeted cash-on-hand through for routine purchases can net you some additional passive income, you just have to be disciplined to make it work. Like I said, the cards I detailed above, cards I actually own, are a great way to make this whole thing go, but you can use others. Whether you use the extra cash to invest, get out of debt, or just have some fun, it's going to be more than you would have had otherwise, and every little bit helps.

Anyone that had Litecoin in a desktop or paper wallet now has 10 LCC coins for every 1 LTC coin they held before the fork. As I type this, LCC is trading at $5.68/coin. That's quite a healthy gain on an "airdrop" from an asset that otherwise pays no interest nor dividends.

Where this will go from here, who knows. As this is a brand new coin, the current action could be only because of that. It might also be that people are confused as to which Litecoin is the real one, and the "cheap" price of the new LCC coins may be drawing in funds. There's no real use case for this new coin, so there also still exists the possibility that this is a "pump and dump" scheme by its creators.

I heard someone say recently that in their opinion, the best use for all of these little, weird fork coins that keep popping up is to just sell them and buy more of the currency that they forked from. Personally, I kind of like that idea.

Sunday, February 18, 2018

Over the last several days, despite hundreds of views of the blog, the needle on the miner didn't move at all. Because the system was set up to ask for consent from readers before mining Monero with a little bit of their CPU power while on this site, it appears that everyone said, "no." I think I have to blame Coinhive for this, because the little window that would pop up to disclose the presence of the miner and ask for permission only said that my site wanted to use some of the reader's CPU power, but it didn't say why, or how. It almost read like a virus was going to take over the reader's computer if they agreed. That's a head smacking stupid move on Coinhive's part, so I have to assume that the information window was written by nerds who don't socialize much and don't understand people very well.

Anyway, since my experiment with full disclosure, informed (imperfectly) consent site mining has failed, I thought I'd share with you all an article I came across about combating the other kind of mining going on in your browser: sneaky use of your CPU that you don't know about.

Saturday, February 17, 2018

I didn't think anyone could possibly top Forbes and Fortune Magazine for absolutely ill-informed, idiotic commentary on Bitcoin and all things crypto, but Ellen DeGeneres has come from behind to take the crown. Have a read over this piece from Coindesk: "Ellen DeGeneres on Bitcoin: It's Either Worth $20k or Nothing."

(You should probably swallow your food or drink if you're consuming some right now before reading this, otherwise you might end up spitting them on your monitor.)

One possible explanation for the different action in the two assets that have begun to be viewed as "safety trades" is simply that Bitcoin is a 24/7/365 global market while gold trades Monday through Friday. Sometimes traders unload gains before a weekend and then pick up where they left off when the market opens again the following week.

Friday, February 16, 2018

"You can add Western Union to the growing list of banks and financial institutions that are test-driving Ripple, the blockchain company trying to become the go-to service for global money transfers.

On the company’s earnings call on Tuesday, CEO Hikmet Ersek told analysts that the company is experimenting with Ripple for settling transactions and for capital optimization. Western Union is also testing Ripple’s native currency, XRP, a spokesperson confirmed.

Ersek’s comments, cited below, come a month after Ripple announced a tie-up with Western Union’s rival Moneygram, which is also testing XRP in money transfers." -- J. J. Roberts

So that's two major, rival money transfer services looking to get in on what Ripple offers.

The importance of this is pretty easy to understand when you know a few key pieces of information about the current state of this industry and how Ripple proposes to change it:

That's why I own the stuff (I got in at .19 cents). Ripple and XRP pass my major crypto test when I decide if I want to own one: does the coin do something truly unique in the crypto space that solves a real world problem? In this case, check and check!

Thursday, February 15, 2018

(Note: I'm still conducting a "test" of the Coinhive in-page background miner on my blog, which is the pop-up you saw when you arrived here that asked for permission to use some of your CPU's processing power to support this blog. It's mining Monero in the background on your computer harmlessly and only while you are on this page, if you gave consent. I'm wanting to gather reader input on the system, so please leave your comments as to what you think about it; I'm trying to decide if I should keep it or boot it. Thanks!)

Litecoin (LTC) is surging right now, from a low earlier this month (just a few days ago, actually) of around $143, and as I type this it's sitting at about $224, a gain of about 57% in a matter of days.

Why?

Because of the looming Litecoin Cash hard fork that is set to occur in three days. Just like the Bitcoin Cash hard fork last August, the prospect of "free money" attracted more cash to Bitcoin. And free money it essentially was: after the fork occurred, those of us who were HODLing Bitcoin past the moment it occurred found that both coins continued on, rather than one or the other crashing and burning.

"PSA: The Litecoin team and I are not forking
Litecoin. Any forks that you hear about is a scam trying to confuse you
to think it's related to Litecoin. Don't fall for it and definitely
don't enter your private keys or seed into their website or client. Be
careful out there! https://t.co/qXbiIxp5Al" — Charlie Lee [LTC] (@SatoshiLite) February 4, 2018

So why is someone forking Litecoin? Just like with the Bitcoin Cash fork from Bitcoin, the stated reason is to increase the efficiency and speed of the blockchain while also lowering costs. As the above-linked article describes, the people behind this fork want to reduce the block speed to 2.5 minutes per block, switch to a "proof-of-work" mining method that could be used by older mining hardware (stuff that got sidelined as specialized ASIC mining rigs came to dominate mining of many blockchains), and a reduction of transfer fees compared to Litecoin of 90%.

Sounds good, right? Maybe. There's just one thing about all of this that potentially spoils the whole party: as the Benzinga article I linked to above describes, none of the team working on this, the so-called, "Litecoin Cash Foundation," can be identified.

What this could be then is an attempt to get people to try to claim their Litecoin Cash by entering their Litecoin wallet private keys into a site that these anonymous actors may have created, which will simply vacuum out the contents of a Litecoin wallet. Because of how forks work, where an existing wallet address is included in the history of the new and old blockchain, this is a normal step in claiming the new coins on the new chain. However, if the fork never actually occurred and there is no new blockchain, then thieves can simply set up a site the claims to give people access to their new coins, which only steals their existing, actual coins.

So if the Litecoin Cash team are telling people to use a safe and theft-proof method of claiming their Litecoin Cash, what could be the possible nefarious angle here? It could be that this whole thing is just a "pump and dump" scheme. Basically, the hype around this coming forking event will drive up the value of Litecoin, which will in turn translate into a higher value for Litecoin Cash at the fork. Then in the aftermath of the fork, Litecoin Cash will likely attract more buyers at whatever exchanges it might be listed on, further increasing its price. And then the anonymous development team behind all of this, who may hold a sizeable number of "premined" Litecoin Cash coins will simply dump theirs and walk away with a big pile of money, leaving all other Litecoin Cash holders with a rapidly devaluing cryptocurrency that never actually had a useful purpose in the global marketplace.

Of the two scam possibilities here, I think the second one I've described is the most likely. Basically, my thoughts on this fork can be summarized as, "why?" I can't see any purpose for it because I'm not aware of pent up demand out there for a faster, lighter, and cheaper Litecoin, specifically because Litecoin IS faster, lighter, and cheaper than what it was built to compliment: Bitcoin. Also, while I do know that some merchants out there accept Litecoin as a primary form of cryptocurrency payment, I don't know of that many who do, and since Litecoin Cash will exist as a separate blockchain, it can't be accepted in place of Litecoin without merchants making upgrades to their systems to include it (just like how Bitcoin Cash isn't accepted over-the-counter at the hundreds of thousands of places that accept Bitcoin, because they're not interchangeable!). Basically, Litecoin Cash will have no real world use case behind it, it will only be useful for trading between other cryptocurrencies on exchanges, and there's certainly no shortage of cryptos to do that with already. This proposed new coin, like so many others, does absolutely nothing that's new.

Basically, I think these guys are trying to fix what isn't broken, and while there's a chance that they're really honest actors that are just tilting at windmills here, I think there's an equal or possibly greater chance that they're just looking to make a fast buck on people's hopes for their new coins to turn into a Lambo that they can drive on the moon.

What I'll be doing then is proceeding with cautious lethargy (I think I just coined a new term there; you heard it here first!). I'm just going to let the fork happen, leave my Litecoins in the wallet they're presently in, and just assume that I have Litecoin Cash out there on the new, post-fork blockchain that will (may) result. I've done the same thing with each and every fork of Bitcoin that has occurred (the number of which I've actually lost track of).

When the day comes that I move my existing holdings to a hardware wallet that I plan to acquire, then I may try using the private keys of the old, empty wallets on the new blockchains to claim those other coins that are out there. If those coins still exist at the point at which I do so, then I will have them, too. If they never existed or have failed and gone away since the forking events that created them, no big deal, because my legit Bitcoins and Litecoins will be safe and sound in new wallets on their respective blockchains, out of the reach of anyone who might have set up a malicious site to steal my old private keys.

Wednesday, February 14, 2018

Yesterday I came across an article at Coindesk about in-browser mining that is activated when you visit a website. However, unlike the sneaky, malicious varieties you may have heard of, background miners that activate without your knowledge, follow you all across the web, and suck up as much processing power as possible, this one tells you that it's there, stops working once you leave the site where it's hosted, and politely gets out of your way when you need more of your CPU's power.

The miner, which is embedded in the website via a simple javascript code, activates when a reader visits the site and consents to allowing it to operate during the session. It only uses what CPU power the reader does not need (for example, if you open another browser tab to cross-reference something you're reading, it will lower how much processing time it is using to get out of your way), and it shuts down once you leave the site. (I've verified that it really does. while watching my task manager, I saw that the processing being consumed by my browser dropped as soon as I closed the tab I had my blog opened in. I didn't have to close the browser completely, just the one tab!)

I decided to try it out here, which is why you saw that pop-up asking if you would consent to allowing the Coinhive miner to run while you're reading this blog. If you agreed, then as you're reading this, the miner is earning me a tiny bit of Monero, the crypto that it is designated to mine.

Personally, I get very annoyed by the advertising on websites these days, especially the trend of interrupting a reader with pop-up advertising (sometimes more than once!). I think this method of generating revenue for a site is a nice, long overdue alternative.

Of course, the pop-up could be alarming to people who do not recognize it (I'm going to try and install a "what is this?" permalink somewhere near the top of the blog to help counter that). At first when I plugged it into the blog and tested it myself I went, "oh no... this is going to make people think my site got hacked and is hosting malware." Unfortunately, that is basically what happened to Coinhive's invention at first, that it was hijacked by bad actors. That is why there's now a pop-up that appears once per browser session that informs you of the miner's presence before it activates: the bad actors didn't want you to know it was there, while honest participants like me DO want you to know that it is there, and hopefully convince you to allow it to work while you're here (at least in part so maybe intrusive advertising can be done away with...).

So we'll see. I can tell from looking at my dashboard this morning that since last night a few of you out there did allow the miner to run. So far, so good. I'll be keeping an eye on daily site visits and how much the needle moves on this thing to see if it's worth keeping or if it's likely to chase everyone off.

What do you think? Comments are open, please leave your thoughts below!

Tuesday, February 13, 2018

I logged in to my Hashflare account this morning to check on its progress, and this came up on the website landing page:

If you're having trouble reading the code, it is: HF18SVALDAY. The offer is valid until the 18th of this month (this coming Sunday).

I tried the code and did indeed receive 10% off of my order. As I've written about before, using cash back credit cards to buy these mining contracts can provide a performance-boosting discount (provided you do not carry the balance and pay no interest - spend on a credit card as if you're spending cash!). Combining a cash back reward with a merchant discount can boost performance quite a bit more!

I'm going to take advantage of this to add some more contracts to my account. Through reinvestment and a few referral commissions thanks to some of you, my account has surpassed 1 terahash of mining power. The anticipated annual return has declined from where it was when I opened this account because of Bitcoin's price decline, but it is recovering now and growing right alongside the seeming recovery in BTC's price. If we have already bounced off the low for Bitcoin, then those reinvested proceeds from my existing contracts should perform nicely over the year that they'll be in place.

Monday, February 12, 2018

Lately I seem to be finding Wall Street Journal articles that are not hidden behind a pay wall, and I have no idea why. Maybe this article is just "free" content, or maybe my VPN is confusing their website and they just give out free access to Mexico-based IP addresses. Long story short, I don't know if you'll be able to see this article or not, but I hope you can.

Anyway, it's about Bitcoin mining going on right here in Washington state, not very far from where I live. The reason: we have hydropower, and hydro-generated kilowatts are cheap.

This has attracted several operations to my state, one of which I own shares in, MGT Capital Investments (they appear at the very end of the article).

In part the article details the growing pains that local utility providers are going through because of this. The server farms that mine for coins can suck up a lot of power, and the main issue there is delivery: in many cases the infrastructure required to deliver that power doesn't exist and will have to be built. But there's hesitation on the part of the providers because they're worried about the mining industry drying up and blowing away, leaving them with millions in infrastructure investment and no way to earn a return on the investment.

The article also mentions the long-time locals that live in this area, who are expressing concern over the possibility that power rates will rise as the excess supply in the system gets used up, which certainly could happen.

All the same, that kind of propaganda combined with a "crisis" of increasing power rates is all the cover that a state government like the one we have in Olympia needs to step in and "do something about it" (in this case, probably by enacting a proposed 'carbon tax' in this state, which will add $3.3 billion to the cost of living here, ironically by making power more expensive...).

Put that together and I'm skeptical of the future of crypto mining in my state. This place is already very hostile to the technology, having enacted "consumer protections" that limit our choices of exchanges (we can pretty much only use Coinbase and Gemini here; other exchanges can apply to do business in Washington, but of course they must pay enormous fees to our state government, "for our safety..."). This prompted many crypto operations to up and leave Washington a few years ago, or block access to their sites (Shapeshift is one example: if you try to access their site from an IP address in this state, you get a message that basically says "we refuse to do business with you, because of your government," which puts us on par with North Korea, as the message also mentions).

"Bitcoin started its free-fall in mid-December when it traded just under $20,000 until a few days ago when it bottomed right around $6,000.
The 70% drop ended just after the Dow 30 Industrials had its first
1,000 point plus decline last week. If there ever was a time for Bitcoin
to continue its slide to $1,000 or less
this seemed like this was the “right” time. However, Bitcoin
outperformed not just the equity markets from Tuesday to Friday but also
gold and the U.S. 10 year Treasury bond." -- C. Jones

Sunday, February 11, 2018

"The Arizona Senate on Thursday passed a bill that would allow residents to pay their income taxes using Bitcoin or other cryptocurrencies “recognized” by the state’s revenue authorities. The law will next be considered by the state’s House of Representatives.

Accepting payment of income taxes in cryptocurrency has profound symbolic and practical significance. Historically, the use of government-issued currencies for the payment of income tax has helped guarantee those currency’s widespread adoption as a payments medium. Skeptics of systems like Bitcoin, which allow quick global payments but are not issued or backed by governments, have argued in part that their separation from government revenue structures reduces their inherent usefulness and, in turn, value." -- D. Z. Morris

This still has to pass the Arizona house and be signed by Governor Ducey, but the provision within the bill that cryptocurrency payments collected by the state must be converted into USD within 24 hours could make it easy to swallow by the rest of the state legislature and the executive.

This article, which appeared on CNBC, is about a RBC Capital Markets analysts' notice of this negative correlation developing between gold and Bitcoin around the end of last year, which is the time frame in which I noticed the same thing:

As I wrote then, from a bottom for gold (the yellow line) around December 11th, and a peak for Bitcoin (the green line) around December 16th, the two rapidly began to trade places in terms of their price movements, crossing over on January 8th of this year.

While the price movements of the two commodities do not move in perfect sync with each other (almost nothing out there that demonstrates any degree of correlation ever does), the negative correlation does look to be continuing. After gold began to slide, Bitcoin apparently found the bottom of its slide and began to reverse. This suggests that, at least in part, cash flowing out of gold is finding its way into Bitcoin.

Going forward then the question will be, will this become a stronger negative correlation, or is this the beginning of a shift some have speculated might occur one day, that people will abandon the use of gold as a long term store of value in favor of Bitcoin?

Gold has been a traditional store of value for thousands of years because of key physical properties it possesses, namely its durability and scarcity, but also because a fitting alternative did not exist across all of the technological changes during those millennia leading up until now. But now we are in the early years of a new era, a digital one, and the way we do business has changed dramatically, whereas gold has not. Then along comes distributed ledger technology and Bitcoin, with engineered scarcity and durability (more so than gold, practically), and we potentially have the new "perfect" tool to fill that role in this new age. A major, global shift of preference from gold to Bitcoin may be inevitable; after all, you cannot send gold in an email, but you can transmit value in essentially that way via a cryptocurrency.

"Silver 8 Capital,
whose bullish bets on digital assets helped propel its hedge fund to a
771 percent gain last year, told new and existing clients it will allow
mid-month subscriptions after getting several requests from investors to
boost their exposure in the wake of a $500 billion selloff in virtual
currencies over the past four weeks. The Florida-based manager, which
invests in digital assets, early-stage companies and publicly-traded
securities, usually only accepts new money at the start of each month."

Wednesday, February 07, 2018

Yesterday there were hearings before the Senate Banking Committee with the chairmen of the Securities and Exchange Commission and the Commodity Futures Trading Commission on crypto currencies, distributed ledger technology (blockchain), and initial coin offerings.

If you do a quick browse of the subject through the news tab on Google (I used "bitcoin congress" as my search string), the theme you get from reading the headlines is "here come the regulators, Bitcoin is doomed," "regulators to seek more power over Bitcoin," basically several variations of, "they're about to shut it all down."

"In a hearing today before the Senate Banking Committee, Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman Christopher Giancarlo opened up about what the near-term U.S. regulatory fate of cryptocurrency might look like. In a week of plunging prices and bad news, the hearing struck a tone that coin watchers could reasonably interpret as surprisingly optimistic...

...The testimony drew a useful distinction among three pillars of the virtual currency ecosystem (for lack of a better unifying term): cryptocurrencies, “a replacement for dollars;” ICOs, “like a stock offering;” and distributed ledger technologies, or the technical framework generally known as blockchain...

...All told, the hearing was far from apocalyptic for regulationphobes. While it’s clear that the CFTC and SEC have only scratched the surface of the kind of rule sets they’d like to put in place, their plans appeared to be overwhelmingly focused on protecting consumers from threats like rampant ICO “fraudsters” and unsafe exchanges rather than discouraging growth. For anyone interested in the long-term health and viability of virtual currencies, that should come as good news." -- T. Hatmaker

And this happened yesterday:

The two things I've highlighted on this chart may indicate that the Bitcoin market found its bottom. The top circle highlights a candle that resembles a "hammer," and the bottom circle highlights the corresponding spike in trade volume. These two things combined could indicate that a trend reversal is coming, as the combination suggests that bulls are getting back into the action and are gaining strength. Time will tell.

So all in all, yesterday was a pretty good day in the BTC market (which gave my Hashflare mining contracts performance a nice boost), despite the headlines, which consistently try to portray nearly everything as a negative when it comes to this stuff. It makes one wonder what the motivations are and who is working for whom...

"In Washington State, lawmakers in the house and senate have proposed
legislation to remove a statewide ban enacted in 1981 that forbids local
jurisdictions from enacting rent control. The bills aren’t poised to be
voted on this year, but
Brett Waller,
director of government affairs at the Washington Multifamily
Housing Association, said he expects them to come under serious
consideration for a vote in the next session." -- L. Kusisto

This tells me that I have about a year or two before our state legislature gives the municipality where I own rental property the ability dictate my rents, and thereby destroy the value of my property.

Put all of this together, and it says to me that the political winds in Washington are blowing in a direction that will harm capital. So, it's time to get my assets out of here before much of this takes effect. Whether you lean left or right, the fact of the matter is that these kinds of antics drive away investment, which means a reduced market for whatever you may hold in this state, which will lead to a decline in the value of what you own. The market doesn't care what your politics are, only what the future expected returns on your assets are.

And of course less investment means less business, which means reduced tax receipts to the state and municipal governments here, which means it will be harder for them to pay on their debt obligations.

Any Washington state municipal bonds that I may have, I'm dumping them before it's too late, too.

There's family obligations holding me in place here for now, but once those pass, I'm out of here. I can see no future for my money in Washington state, and that means there's no future here for me either.

"Banks in Britain and the United States have banned the use of credit
cards to buy Bitcoin and other “crypto currencies”, fearing a plunge in
their value will leave customers unable to repay their debts." -- L. White and E. Rumney

This is utter crap. If this is truly the concern that they have, then these banks, and all others considering similar moves, should immediately block peoples' ability to buy anything with their credit cards that could lose value.

No more books on Amazon. No more meals out with friends. No more Xbox games. No more lattes at Starbucks. No more Vegas vacations. No more trinkets and baubles and knick-knacks of any sort.

The vast majority of things that people buy with credit cards only lose value, typically the majority of it evaporating as soon as the item is purchased! Just imagine your credit card issuer calling you up to say, "hey, those groceries you keep buying, we've run an analysis and found that they've consistently lost 100% of their value over time, we're going to block your purchases at Albertson's." Sound ridiculous? It is, but that's the reasoning they're selectively applying here.

The difference being of course that someone's Bitcoin purchase via credit card could very easily shoot up in value...

That said, since when do these banks issue credit cards based on the likelihood of the things you buy with them going up in value? They don't! They issue credit cards based on your assumed future income net of debt servicing obligations, your net monthly cash flow. Their questions are only about your income and other debts when you apply. They never ask about your assets!

Sunday, February 04, 2018

The big drop in the equity markets on Friday certainly got people chattering. A 666 point decline in the Dow Jones in a single session gets noticed, even though in context that's just a 2.54% decline. Maybe it's a sign of things to come though as rising wages potentially spur price inflation, which could prompt the Fed to continue to raise interest rates and thereby lower the appeal of equities.

The prospect no doubt frightens a lot of people. Me though, I like it.

I know what some of your are probably thinking: "50 positions is too many companies to keep track of!"

You're right, it probably is. If you're a fundamental analysis kind of guy or gal. And if you are, my portfolio would probably drive you nuts, because I really only track two things: the current relative dividend yield, and the percentage of the total income of the portfolio contributed by each position.

Those two things establish the simple rule I run the portfolio by: new cash will be plugged in to the position that is the highest yielding opportunity within the portfolio at the moment that also offers an increased yield over my yield-on-cost on that position due to a share price decline or a dividend increase, and it must not currently contribute 2% or more of the total income of the portfolio. I track this with a spreadsheet I created that flags each position in green if it meets these criteria, or red if it currently does not.

This has resulted in a portfolio that contains domestic equities, international, heavy and light industry, health care, telecom, property and debt REITs, energy production, movement, and storage, corporate bonds, municipal bonds, exchange-traded funds, closed-end funds, even some exotic, risky stuff, such as leveraged exchange-traded notes. It's highly diversified and spread out such that when the Dow plunged 2.54% on Friday, my portfolio declined by only about half of that percentage amount.

You've probably noticed then that 50 positions yielding 2% of the total portfolio income adds up to 100%. You could do the same thing with ten positions each kicking in 10%, 100 positions each kicking in 1%, etc. The reason I went with 50 is I found it to be a nice balance between simply finding enough things to buy in to, and 2% max of the portfolio income coming from each is small enough for it to serve its purpose: limiting the damage to overall income should any of these companies cut their dividend, which sometimes goes hand-in-hand with high yields.

And that does happen. This morning I went through the entire list and updated dividend payouts. While there were many dividend increases, there were a handful of cuts, but overall the total income of the portfolio increased. It's currently sporting a 10.61% yield, which I'm actually hoping will go higher if stock markets enter a broad decline.

On Thursday morning last week, I added to five of my positions, following the rules I spelled out above, which resulted in share purchases of 6, 1, 14, 1, and 13. The total invested was about $475 and it added a bit more than $55 to the annual total income of the portfolio.

Those single share purchases are specifically why I use Robinhood for this. They were purchases that offered the highest yield I could get, but the positions I was adding to were so close to the 2% income cap on each that buying just 1 share was all I could do to avoid exceeding my 2% limit on total portfolio income from those stocks. In any other brokerage account, commissions would kill your cost basis and your yield if you bought only one share at a time, but because Robinhood is commission-free, I can use it to tightly tailor the income of each of my 50 positions without incurring exorbitant costs.

Friday, February 02, 2018

I came across this article last night and thought it would make for the subject of a good, quick post (this is a "dark and early" kind of work day at my pest control business, so I'm pressed for time).

"In 2013, Arthur Hayes was biding his time as an equities trader for Citigroup Inc. in Hong Kong. His energy—he’s a fitness fanatic and an early riser—was better suited to another era in finance. Six years earlier, as a recent arrival in the former British colony, he’d gotten a taste of what the golden age in banking felt like when he worked in the “snake pit,” the equity derivatives sales desk, at Deutsche Bank AG’s office. The markets were on fire. Traders were taking helicopter trips to the casinos of Macau to celebrate their triumphs. Hayes loved the rush of the trading floor at full throttle along with the life that went with it, including nights at the Dragon-i club. At Citi, a few years after the financial crisis brought a new order to the industry, those madcap days seemed like ancient history. Indeed, he was about to lose his job in one of the periodic culls that big banks carried out after the crash. But Hayes wasn’t too distraught: He’d discovered Bitcoin...

...Hayes alone knows seven former Deutsche Bank colleagues who’ve gone
crypto. Almost all them went through the lender’s graduate program
around a decade ago, the same time he did, and they all came of age when
the bank, like its peers, whacked bonuses and jobs and lost its
swagger. “We missed out on the peak of finance,” says Hayes, who’s been
known to show up for meetings in workout gear. “Instead we got the
decline. There’s not as much money, not as much risk, not as much flow.
It’s boring. Bitcoin reminds us of what it must have been like trading
an asset class in the late ’80s and ’90s.” -- E. Robinson and V. Vaghela

I really liked reading this story for several reasons. The main part of that is what I've highlighted above from the full article, that Hayes and crew got into finance at the end of one era, something that they had banked on being there for them, only to end up walking on to the trading floor just as the roof was coming down. Then along comes something totally new and untamed, and they waded right into it and began staking their claim.

It reminds me of when I became a stock broker. I had just graduated with my undergrad degree, got picked up by a small investing advising firm in Seattle, got my series 6. 7. and 66 licenses from the SEC on my first try for each, and then with few contacts and no family connections plunged head first into the 2001-2002 markets...

It didn't work out for me then and I moved on to other endeavors (but I took the knowledge I gained with me and just put it to work for myself instead). Reading about Hayes' experience reminds me of all of it, and it reminds me that "didn't work out then" does not mean "never..."

"The Indian government is to ban the use of Bitcoin and other
cryptocurrencies, finance minister Arun Jaitley has announced, kicking
Bitcoin’s already-sliding value further down the slope...

...“The Government does not consider cryptocurrencies legal tender or coin
and will take all measures to eliminate use of these crypto-assets in
financing illegitimate activities or as part of the payment system,”
Jaitley said Thursday in his 2018 budget speech. “The Government will explore use of block chain technology proactively for ushering in digital economy.” -- D. Meyer

This is perhaps unsurprising given the Indian government's other relatively recent monetary antics, their sudden decision to ban 500 and 1000 rupee notes in late 2016, which created a crisis among India's poorer folks as holding cash at home was the primary means of saving for them. Then as now their excuse was that they needed to combat "illegitimate activities."

In both cases, in the name of combating crime, the Indian government has hurt millions of its own citizens, thus demonstrating how stupid and backwards that government is. Punishing millions of innocents for the alleged actions of a few is no way to dispense justice, and if the experience of India's neighbor, China, is any indication of what happens next, Bitcoin trading there will simply go underground. Who is likely to benefit from that? Quite possibly the very criminals that the Indian government thinks (or pretends...) it is combating.